Sadukey RSI Momentum Forex Trading Strategy

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Sadukey RSI Momentum Forex Trading Strategy

Which is easier to anticipate, things that will happen an hour from now or things that will happen 5 years from now? Chances are it you would be much better off guessing what will happen in the next hour rather than in the next five years. You would know if you would still be sitting on your desk, going to work, eat lunch or dinner or whatever it may be. It would be very difficult to know what you would be doing at exactly the same time five years from now.

The same is true with trading. It is easier to guess the direction of the next few candles rather than the next hundred candles. This is the reason why there are some traders who profit trading short-term with a relatively high accuracy. Options traders also tend to trade in this manner, setting their time limit within a few candles and exiting the trade quick.

Trading based on signals that affect the short-term is very well suited for momentum trading strategies. Momentum usually pushes price to move in the same direction for the next few candles. This allows traders to profit quick enough if targets are placed in a logically feasible distance from the entry point.

Sadukey RSI Momentum Forex Trading Strategy is a momentum strategy that thrives on short-term momentum trades. It often allows traders to profit quickly within the next few candles rather than wait for the trend to fizzle out.

RSI Filter

The RSI Filter indicator is a custom technical indicator that filters trades based on the last momentum direction. It is based on the classic Relative Strength Index (RSI) which is a momentum indicator that measures the strength of recent price changes.

The RSI is an excellent oscillator because it could help traders identify trend, momentum and mean reversals. The classic RSI is a range bound indicator which mimics the movement of price action within the range of 0 to 100. Trending markets is identified by having a line that stays within a trending zone for a long period. Bullish trends have RSI lines that stay above 45 while bearish trends have RSI lines that stay below 55. Momentum on the other hand is identified by price pushing beyond its usual range. Bullish momentum is identified when the RSI line is pushing above 70 and bearish momentum is identified when the RSI line is falling below 30. Mean reversals on the other hand is identified by an RSI line which is reversing coming from zones beyond the 30 to 70 range which could start a reversal on price movements.

The RSI Filter takes information coming from the RSI indicator and identifies momentum and trend. It prints positive orange bars whenever a bullish momentum is identified and negative sky-blue bars whenever a bearish momentum is identified. It retains the same signal until the trend is negated based on the RSI.

Sadukey Indicator

Sadukey is a custom trend following indicator that is designed to indicate the direction of the short-term trend. It indicates trend direction by printing bars that change color on the price chart.

In a bullish short-term trend, the Sadukey indicator prints red bars that are usually below the price candles. On the other hand, in a bullish short-term trend, the Sadukey indicator prints blue bars that are usually above price.

Because the Sadukey indicator is geared towards the short-term trend, it usually responds to price changes very quick. This makes it a great tool to identify momentum changes.

During a momentum reversal, price would usually cross over the Sadukey bars and cause the bars to change color immediately.

Trading Strategy

This trading strategy trades on a confluence of momentum indications coming from the Sadukey indicator and the RSI Filter indicator.

First, trades are filtered based on the RSI Filter indicator. This will be based on the color of the current RSI Filter bars. This would ensure that we are trading in the direction of the latest long-term momentum price move and trend direction based on the indications coming from the RSI.

Then, we observe the chart if price action is trending or not. In a bullish trending market, price swings will constantly be making higher highs and lows. On the other hand, in a bearish trending market, price swings will constantly be making lower highs and lows.

If these factors are observed, then we will wait for our specific entry signal using the Sadukey indicator. Price should retrace and temporarily cause the Sadukey indicator to reverse. Then, as price resumes its trend direction, price must form a strong momentum candle that crosses over the Sadukey bars and cause the bars to change color.

Indicators:

  • Sadukey (default setting)
  • RSIFilter (default setting)

Preferred Time Frames: 1-hour, 4-hour and daily charts

Currency Pairs: major and minor pairs

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • The RSI Filter should be printing positive orange bars.
  • Price action should be making higher highs and lows.
  • Wait for price to retrace and cause the Sadukey indicator to temporarily change to blue.
  • Enter a buy order as soon as a bullish momentum candle closes above the Sadukey bars and cause the Sadukey bars to change to red.

Stop Loss

  • Set the stop loss a few pips below the entry candle.

Exit

  • Set the take profit target at 1.5x the risk on the stop loss.

Sadukey RSI Momentum Forex Trading Strategy

Sadukey RSI Momentum Forex Trading Strategy 2

Sell Trade Setup

Entry

  • The RSI Filter should be printing negative sky-blue bars.
  • Price action should be making lower highs and lows.
  • Wait for price to retrace and cause the Sadukey indicator to temporarily change to blue.
  • Enter a sell order as soon as a bearish momentum candle closes below the Sadukey bars and cause the Sadukey bars to change to blue.

Stop Loss

  • Set the stop loss a few pips above the entry candle.

Exit

  • Set the take profit target at 1.5x the risk on the stop loss.

Sadukey RSI Momentum Forex Trading Strategy 3

Sadukey RSI Momentum Forex Trading Strategy 4

Conclusion

This strategy is a quick trading strategy that would last less than 10 candles. Price would often hit its target very fast that profits could sometimes be made within three candles.

Because of the fixed take profit target, the reward-risk ratio is also fixed at 1.5:1. What would matter now is the second variable which is accuracy or win rate. This would often depend on the strength of the momentum candles being taken and if the market is trending strong enough. Master identifying good trends and momentum candles, and you could be growing your account using this strategy.

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